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How TV can succeed in the digital age — Daniel Schiffman

July 25, 2016 – 11:48 am

Daniel Schiffman, MIT Sloan MBA ’15

From Forbes

The media landscape has changed tremendously over the past year, and as we look ahead to 2016 a big question is: What is the future of TV? Television has long been the leading medium when it comes to American video consumption, but the landscape is quickly changing. Traditional TV is seeing competition from video streaming providers like Netflix and Amazon, Over-The-Top (OTT) devices such as Chromecast and Roku, and streaming content on a myriad of personal devices.

While big data is a powerful tool, it hasn’t yet unseated TV from its place at the head of the pack. A Nielsen Total Audience Report for Q2 2015 shows that adults 18+ spend more than 32 hours a week watching television, giving TV a 95% share of all video viewing. As for advertising, TV is where we see the majority of spending. It’s a $72 billion-a-year industry in the U.S., compared to $50 billion for digital advertising. However, if TV is going to stay the leader amid this digital disruption, it needs to make some changes – and make them fast.

Not surprisingly, we’re starting to see TV experiment with alternate data collection methods. The traditional means to obtain data about television viewership has long been the Nielsen rating system. That is based on a panel of roughly 25,000 homes in the U.S. and collects data once every minute. However, it really only tells us what is on the TV screen in that home. It doesn’t show if anyone is actually in the room watching the TV, or, if they are in the room, whether they are attentive to the program. Yet Nielsen has long set the standard for telling us what Americans are supposedly watching, which sets the pricing for TV advertising.

A newer player in this space is Rentrak. This company buys data from the cable companies to sell in a subscription model, but it only knows what channel is on the set-top box. Privacy issues present another challenge, as they limit the company from selling certain types of data. Nonetheless, the company is gaining traction. In November, Fox officially announced it would stop using what had been an industry standard for ratings (“Live+Same day”) from Nielsen, as viewing habits have changed substantially making these numbers inaccurate.